Local Loan Co. v. Hunt 292 U.S. 234 (1934)

U.S. Supreme Court

Local Loan Co. v. Hunt, 292 U.S. 234 (1934)

1. A court of bankruptcy has jurisdiction by ancillary proceedings to enforce an order of discharge by enjoining the prosecution of suits brought against the debtor. P. 292 U. S. 239.

2. Such a proceeding being ancillary and dependent, the jurisdiction of the court follows that of the original cause, and may be maintained without regard to the citizenship of the parties or the amount involved, and notwithstanding the provisions of § 265 of the Judicial Code; R.S., § 720; 28 U.S.C. § 379. P. 292 U. S. 239.

3. Where the legal remedy of setting up a discharge as a defense in an action involving the rights of the bankrupt under it would entail not only his intervention in a state court of first instance, but also, because of previous decisions of the State Supreme Court, a succession of appeals, causing disproportionate trouble, embarrassment, expense, and possible loss to the bankrupt, held that the remedy was inadequate, and that the equitable jurisdiction of the court of bankruptcy by way of all ancillary suit for injunction was properly engaged. P. 292 U. S. 241.

4. An assignment of future earned wages to secure a loan held not a lien within the meaning of § 67(d) of the Bankruptcy Act. P. 292 U. S. 242.

5. That such an assignment, even if a lien under the state law, should survive the discharge of the debt in bankruptcy would be contrary to the policy of the Bankruptcy Act to free the debtor, and so it must be held, where the suit is ancillary in the bankruptcy court to enforce the discharge, though the decisions of the state court be to the contrary. P. 292 U. S. 244.

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